Next summer’s peak demand in Texas is forecasted to grow by about 3% compared to the summers of 2019 and 2020. The good news is that new generation is being added at a faster rate, which will create a higher Reserve Margin where the amount of electricity supply exceeds the forecasted demand. Most of this new generation is coming from renewable power projects across Texas. Once it is operational, the Samson Solar project, a 1,310 MW solar array in Northeast Texas, will become the largest solar farm in the US.

The weather has been unusually warm this month, which has drastically pushed down natural gas prices. This stretch of higher temperatures in Texas and across the US has taken a lot of energy out of both the natural gas and electricity markets. It has also created very attractive opportunities for shorter-term purchases, since natural gas is the fuel for many for power plants across Texas. Moderate temperatures along with low spot price volatility from this summer have created weakness in future heat rates and also contributed to this electricity market correction.

Yesterday, November 5th, ERCOT released its Seasonal Assessment of Resource Adequacy (SARA) for the upcoming winter season. In summary, the grid operator expects to have plenty of power plant capacity available this winter. ERCOT expects winter peak demand to top out at 64.5 GW, just shy of the all-time winter peak demand record of 65.9 GWs*. 

Since early 2018, the forward power market in Texas has been in various states of backwardation (prices for a commodity get less expensive into the future). This backwardation made longer retail electricity agreements attractive as each additional year purchased was a chance to capitalize on lower futures prices and reduce the overall weighted average price. Last fall, the slope of that backwardation reached its maximum negative slope (see Figure 1). On November 1, 2019, the price for calendar year 2021 was trading at approximately $44/MWh, while 2028 was trading below $24/MWh. The $20/MWh discount from 2021 to 2028 produced a significant amount of backwardation and a downward sloping forward market for wholesale electricity.

Over the last few months, we have described Texas' increased reliance on wind generation to help meet peak demand requirements for electricity. Over the summer, the rolling black-outs in California were heavily covered in the news with many asking how a state known for its technological advancements with the most solar power has become vulnerable to insufficient power supplies.

Join us for the energy market insights you need to know for your business. 5's Lead Energy Analyst, Eric Bratcher, provides a detailed look into each energy market during three regional webinars.

Temperatures and humidity remain elevated all across Texas, which will increase electricity demand into the late afternoon. The peak demand forecast today is 70,397 MWs, which is expected to occur at 5:00 PM CST.  This would set the all-time record peak for September and exceed the previous high of 69,187 MWs, which was set last year. With cold fronts in the long-term forecast (woohoo!), this may be one of the hottest days of the month.

The last 30 days have shown how the stability of the power grid in Texas is influenced by the wind. In late July, Hurricane Hanna came onshore near Kenedy County as a Category 1 storm with maximum sustained winds of around 90 mph. Its destructive force was felt as it moved across the Rio Grande Valley, causing local structural damage and outages from downed trees and powerlines. Specifically, there was significant damage to a two-mile stretch of 138,000-volt transmission line in Edinburg, just south of the 712-megawatt Magic Valley Generation Station.

It is late August, which means hurricane season is in full swing and our team is closely monitoring the weather in the Gulf of Mexico this week. Hurricane Marco dissipated Monday night as strong upper-level winds stymied its development. Hurricane Laura, however, is a different story. As of 2:00 PM CST on Wednesday, August 26, Laura is bearing down on east Texas and Louisiana and is currently forecasted to come ashore Wednesday night/Thursday morning as a Category 4 hurricane with sustained winds over 140 mph. While it appears the Houston metro area will, for the most part, dodge this bullet, thunderstorms and 20+ mph winds will likely pass through the region over the next 24 hours. Right now, the greater threat is for residents in east Texas as the storm moves north along the Sabine River into heavily wooded areas. The current trajectory puts folks in the CenterPoint, TNMP, and Oncor service territories right in the path of this major storm, which has the potential to cause widespread, sustained power outages if trees and power lines are damaged. We’re writing to provide resources for those in the path of Hurricane Laura if there are power outages.

One final ERCOT 4CP update for the week (and probably for the month as well).

Each day this week, a new Coincident Peak (CP) for the month of August was established! This speaks to the strength of this heat wave and how its increasing intensity throughout the week. Without a lot of rain, there has been nothing to moderate the heat over the last few days, and it’s not over yet.

The high temperature in DFW is 106° today, and the heat index in Houston (which also accounts for the humidity) will approach a lovely 110° this afternoon. Many energy managers and load forecasters alike are worn out but today is yet another high-risk day for setting a new August CP. Fridays are rare 4CP days, but today is one of those tricky situations where the CP for the month may be set if enough energy managers elect not to curtail their electric load. This heat wave is locked in place and it will not budge until Sunday or Monday when a weak front moves through North Texas. One of our forecasting services assigns an 81% probability of setting the August CP this afternoon.